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Ottawa, 11 March 1992
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Decision CRTC 92-163
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Cathay International Television Inc.
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Vancouver, British Columbia - 903041200
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Following a Public Hearing commencing 29 October 1991 in Vancouver, the Commission approves the application by Cathay International Television Inc. (Cathay) for a broadcasting licence to carry on a new ethnic regional specialty programming undertaking to serve British Columbia. The new service will replace the ethnic regional pay television service currently operated by the applicant in British Columbia.
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The Commission will issue a licence upon surrender by Cathay of its existing pay television licence; the new licence, which is to expire 31 August 1998, will be subject to the conditions specified in the appendix to this decision and in the licence to be issued. These conditions, with some exceptions, are consistent with those set out in Cathay's current pay television licence, updated and modified as required to reflect the programming plans and commitments made by the applicant.
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As described in its application, the ethnic service to be provided by Cathay will continue to consist of programming similar in format to that of a conventional television undertaking, including a mixture of drama, entertainment, news, public affairs and children's programming. As in the past, Cathay intends to provide its subscribers with programming in four different languages, namely Chinese (including the Cantonese and Mandarin dialects), Vietnamese, Hindi and Thai. Chinese will remain the predominant language of the service.
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As proposed by the applicant, and in keeping with its new status as licensee of a regional specialty programming undertaking, Cathay will be permitted to distribute a maximum of eight minutes per clock hour of commercial messages of which no more than four minutes shall be local commercial messages.
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Cathay maintained that this access to advertising revenues will permit it to achieve financial stability and bring an end to several years of unprofitability. According to the applicant, the additional revenues will also enable it to introduce improvements to the quality of its service through increases in expenditures on Canadian programming and in the amount of Canadian programming distributed. Further, Cathay stated that the new source of revenues will allow it to reduce subscriber fees, thus making the service more affordable to cable viewers.
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Opposition to Cathay's proposed distribution of commercial messages was expressed in interventions by, among others, Chinavision Canada Corporation (Chinavision) and the Canadian Association of Broadcasters (CAB). Chinavision, licensee of a national ethnic specialty programming undertaking, has long experienced financial difficulties in its efforts to firmly establish its national service. Chinavision noted that, in the Vancouver market, Cathay holds exclusive rights to first-run foreign programming that is generally found to be more attractive to Chinese-language viewers than the programming that Chinavision is able to acquire for this market. Chinavision contended, among other things, that if Cathay is permitted to sell advertising in conjunction with this more popular programming, "...there is absolutely no doubt that our advertisers would migrate to Cathay". The CAB submitted, among other things, that Cathay's proposed specialty service would increase audience fragmentation and draw advertising dollars away from existing broadcasters.
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With regard to the CAB intervention, the Commission considers that the intervener presented little evidence to support its concerns. As for Chinavision's intervention, the Commission acknowledges that Cathay's access to advertising revenues may indeed have some negative impact on the intervener, particularly in the area of local advertising sales. According to the intervener, the ratio of local to national advertising revenues it earns in the Vancouver market is approximately 75:25. The Commission notes, however, that Chinavision's local Vancouver advertising revenues, those potentially most threatened by competition from Cathay, made up only 6% of the intervener's total revenues in 1990; the Commission considers it unlikely that Chinavision would lose all of this local advertising. Although mindful of Chinavision's financial circumstances, the Commission is satisfied that Cathay's commercial activity will not have any undue negative impact on Chinavision's operations, nor on those of other broadcasters in the Vancouver area. On balance, the Commission considers that Cathay's commitments to improve the quality of its service represent a net gain to the Canadian broadcasting system.
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Included among these commitments is Cathay's undertaking to increase the weekly level of Canadian programming distributed on the service from the present level of 17 hours 30 minutes to 27 hours 15 minutes in year one, 29 hours per week in year two, and 31 hours per week in year three. The Commission has, by condition of licence, required Cathay to adhere to this commitment. For the purpose of the condition of licence, the Commission has deemed year one to be the broadcast year commencing 1 September 1992. During the initial phase of the licence term ending 31 August 1992, the Commission expects the licensee to devote not less than 27 hours 15 minutes per week to the distribution of Canadian programs.
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The applicant also made a commitment to increase its annual expenditures on Canadian programming from the level of 19% of Cathay's gross revenues, as required under its present condition of licence, to an average level of 23%. The Commission has, by condition of licence, required Cathay to expend a minimum of 23% of its gross revenues in each full broadcast year of its licence term on the acquisition of, or investment in, Canadian programming. During the initial phase of the licence term ending 31 August 1992, the Commission expects the licensee to achieve this minimum level of expenditures on Canadian programming on a pro rata basis.
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Under an existing condition of licence, Cathay has been providing a minimum of 15 hours per week of programming in the Vietnamese language. In its present application, Cathay made a commitment to improve service to Vietnamese subscribers by including, as part of this 15 hours, a minimum of three hours per week of locally-produced programming in Vietnamese. Adherence to this commitment shall be required by condition of licence. The Commission notes the licensee's undertaking to ensure that at least one hour per week of its locally-produced programming in Vietnamese is especially tailored to the Vietnamese community.
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The Commission notes the applicant's further plans, as part of its Canadian programming commitment, to provide eight hours per week of programming in the Mandarin dialect using second audio programming (SAP) technology; to introduce, within the first year of the licence term, an additional seven hours per week of non-Canadian entertainment programming in the Mandarin dialect (to be distributed in prime time using SAP technology); to invest the sum of $500,000 in an upgrade of its production equipment, thereby improving the quality of its local program production; and, to introduce an immediate reduction in the monthly rate charged to subscribers from the current rate of $23.50 to $19.95, with additional reductions to $15.95 in year six.
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At the hearing, the Commission discussed with the applicant its longstanding inability to attract to its service virtually any subscribers of Indian or Thai origin. This has been despite Cathay's investment of approximately $65,000 per year in programming directed to those communities. The Commission notes the applicant's intention to continue to provide 10 hours per week in Thai and 15 hours per week in Hindi. However, in light of the apparent absence of interest, the Commission has not specified any quantitative condition of licence requirements for such programming. Should Cathay, under the terms of its new licence, now elect to reduce its expenditures on such programming, the Commission expects the licensee to ensure that an amount equal to the amount of the reduction is reinvested in the production of improved or additional local programming directed to the other language groups.
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In addition to those noted above, the Commission acknowledges the other interventions received with regard to Cathay's application, including many submitted in support by members of Vancouver's Chinese business community, various educational, health care and social assistance institutions, elected officials and other interested parties.
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Allan J. Darling
Secretary General
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APPENDIX/ANNEXE
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Conditions of licence with respect to the regional ethnic specialty programming undertaking licensed to Cathay International Television Inc.
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1. The licensee shall not provide the service to any location outside of the province of British Columbia without obtaining the prior approval of the Commission.
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2. The licensee shall, during the period concluding 31 August 1992, and in each six-month period thereafter, devote not less than 60% of the total time i) during which programming is distributed on its undertaking and ii) during the hours between 6:00 p.m. and 10:00 p.m., to the distribution of Type A programs, i.e. those in languages other than English, French or native Canadian.
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3. The licensee shall devote to the distribution of feature films not more than 25% of the total programming time permitted for the distribution of programs in English, French or a native Canadian language.
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4. The licensee shall devote to programming in Vietnamese no less than 15 hours per week, including 3 hours of locally-produced programming.
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5. The licensee shall devote to the distribution of Canadian programs not less than 27 hours 15 minutes per week during the broadcast year ending 31 August 1993, not less than 29 hours per week in the broadcast year ending 31 August 1994, and not less than 31 hours per week beginning 1 September 1994 and for the duration of the licence term.
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6. The licensee shall, in the broadcast year commencing 1 September 1992 and in each broadcast year thereafter, expend not less than 23% of its gross revenues for that year on the acquisition of, or investment in, Canadian programming.
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7. During each clock hour, the licensee shall not distribute more than eight minutes of commercial messages of which no more than 4 minutes shall be local commercial messages.
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8. The licensee shall ensure that its entire service is distributed to all subscribers in encrypted form.
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9. The licensee shall not enter into any arrangement with program suppliers whereby the licensee would become the exclusive distributor of the suppliers' programming; however, this does not preclude the licensee from entering into an arrangement, for its licensed area, whereby the licensee has the exclusive rights for a particular program or program series, for a period not extending beyond one year from the date such programming is first made available for distribution by the licensee.iii
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10. The licensee shall adhere to the provisions of the CAB's Broadcast Code for Advertising to Children, as amended from time to time and approved by the Commission.
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11. The licensee shall adhere to the guidelines on sex-role portrayal set out in the CAB's Sex-Role Portrayal Code for Television and Radio Programming, as amended from time to time and approved by the Commission.
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Definitions
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For the purposes of these conditions of licence:
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"gross revenue" means the revenue derived from advertising, as well as from residential, bulk and SMATV subscribers; it does not include revenue from DTH subscribers or any return on any investment in programming.
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"Canadian programming" is consistent with the definition set out in section 2 of the Specialty Services Regulations, 1990.
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"expend on the acquisition" means the following:
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a) expend to acquire the exhibition rights for the licensed territory, excluding overhead costs;
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b) expend on the talent fees (on-air and other); directly attributable salaries and benefits; film and tape; studio sets, props and other production materials; use of remote and other productioniv
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facilities; delivery of remote programs to the satellite uplink or main studio; and, any other matter directly related to the production of a program; or
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c) expend on the production of filler programming, as defined in section 2 of the Pay Television Regulations, 1990, including direct overhead costs.
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"expend on investment" means to expend for the purposes of an equity investment or an advance on account of an equity investment, but not overhead costs or interim financing by way of loan.
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"week" means a period of 7 consecutive days beginning on Sunday.
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"clock hour" means a period of 60 minutes beginning on each hour and ending immediately prior to the next clock hour.
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